Is Ripple (XRP) Centralized? Is It Even A Cryptocurrency?

Cryptocurrency is a hot topic these days, and for good reason. In general, a cryptocurrency is designed to be decentralized; a system that requires large amounts of miners to mine the currency and enter transactions into the ledger that is known as the blockchain. However, Ripple is very different. In fact, the entire system surrounding XRP challenges just about everything we know about cryptocurrency.

The One Thing That XRP Has In Common With Others

When we look at cryptocurrency, we expect that the currency is hosted on what is known as a blockchain. The blockchain is ultimately a transparent ledger that is, for the most part, a hack proof log of everything that happens within the particular cryptocurrency’s ecosystem.

When it comes to Ripple, we are indeed talking about a cryptocurrency in that sense. XRP is hosted on a blockchain, where each and every transaction lives within a distributed and highly transparent ledger. However, as you’ll learn below, XRP is very different from any other cryptocurrency in just about every way.

Ripple Cannot Be Mined

In the world of cryptocurrency, miners are a key part of the equation that gives those like Bitcoin (BTC) and Ethereum (ETH) their value. You see, massive amounts of workers, known as cryptocurrency miners solve complex mathematical equations. In doing so, these miners are essentially processing transactions, updating the ledger, and moving the system along. In exchange, for each block mined within the blockchain, the miner receives a specific amount of the cryptocurrency being mined; ultimately creating a pretty profitable opportunity for those looking to mine.

However, XRP works very differently. You see, this particular cryptocurrency, if that’s what you choose to call it cannot be mined. At the end of the day, Ripple is created, and or destroyed, by those who developed the system.

This was done for a very important reason. That reason is security. You see, the founders of XRP saw a key issue with the security of the blockchain as it was before Ripple was created. With so many hands in the chain, while it was designed to be hack proof, someone, at some point, could either hack or manipulate the system, and that wouldn’t be a good thing for XRP or any other cryptocurrency.

Doesn’t That Make Ripple A Centralized Cryptocurrency?

That, my friends, is the question of the day! At the end of the day, the fact that XRP cannot be mined, and instead, coins can be created by the “Central Authority” that created it, Ripple is indeed a centralized system. The reality is that if the authority that owns Ripple decided that it wanted to manipulate the system, much like what we see from Central Banks, that authority could do so.

Is This System Different Or Simply More Secure?

At first glance, when you see a cryptocurrency that’s centralized, you may say to yourself, “Well, that’s not really a cryptocurrency.” However, when you dig into the details, you’ll see that the XRP system, while more secure, isn’t much more centralized that BTC or ETH.

In fact, a recent study, published by Hacked, found that a very small number of miners, 4 for Bitcoin and 3 for Ethereum, control more than 50% of the global hashrate on these blockchains.

At the end of the day, this means that BTC and ETH, like XRP, are centralized. After all, these controlling entities could manipulate BTC and ETH systems at will if they chose to do so.

Final Thoughts

While Ripple is a cryptocurrency, and the thought of the centralized system seems very different from everything we know to be cryptocurrency today, the idea really isn’t that different. At the end of the day, due to those mining cryptocurrencies, the world’s largest and most stable cryptos are essentially centralized. XRP simply takes this to the next level. Instead of opening the door to the blockchain to everyone, the central authority controls the ledger to create a more secure environment for which XRP to live within.

About The Author

Joshua Rodriguez

Hey everyone, I'm Joshua Rodriguez. I'm the founder of CNA Finance as well as several other sites. If you'd like to connect with me, follow me on Google+ or Twitter! I'd love to see ya there. Also, if you're looking for top quality content for your blog, news outlet, or any other website for that matter, please reach out to me at Info@CNAFin.com!
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